This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Cabinet Office Minister Francis Maude has today announced that the government has concluded its negotiations with 5 civil service unions (FDA, Prospect, Prison Officers’ Association, GMB, Unite) on a new Civil Service Compensation Scheme (CSCS).

The scheme, which covers all civil servants, sets out the level of compensation that can be paid if they are made redundant.

The new scheme would enable the government to introduce reforms that are affordable, sustainable and fair for civil servants and taxpayers. The terms also offer significant extra protection for lower paid staff and for those with long service who are close to retirement. As part of the government’s commitment to fairness, they would also limit the maximum payments to the highest earners.

In addition, the terms set out today would simplify the scheme and ensure that compulsory terms would never be better than voluntary terms. Key measures include:

a standard tariff, where each year of service provides one month’s salary in the event of redundancy; the tariff would be capped at 12 months for compulsory redundancy and 21 months for voluntary redundancy

all civil servants who are made redundant (voluntarily or compulsorily) would be entitled to a 3 month notice period

Protection for the lower paid

The terms would also provide significant protection for lower paid civil servants. Any civil servant earning less than £23,000, who is made redundant, would be deemed to earn that amount (£23,000) when their redundancy payment is calculated.

Limiting payments to the higher paid**

Staff earning more than six times the Private Sector Median Average Earnings (currently £149,820) would have their salary capped at this figure for the purpose of calculating their redundancy payment.

Provision for those nearing retirement**

Staff who have reached minimum pension age may be able to opt for early retirement when they leave, in return for surrendering the appropriate amount of any redundancy payment.

Francis Maude said:

Throughout this process we have been committed to reaching a negotiated settlement that is affordable and gives protection to lower paid civil servants. These five unions - Prospect, FDA, Prison Officers’ Association, Unite and GMB - have made great efforts during the talks to reach an agreement about a sustainable scheme, while securing the best deal for their members.

The previous scheme was simply no longer fit for purpose and had to change. In today’s tough economic climate, we would be failing in our duty to the tax-paying public if we had allowed its excesses, which saw some employees walking away with packages worth more than 6 years’ pay, to continue. Together with the five unions we have concluded negotiations over a successor scheme that would ensure maximum fairness for all by giving extra protection to the lower paid, while limiting payments for higher earners.

There is of course one name missing from the list of unions, the PCS. I greatly appreciate the efforts of the 5 other unions whose constructive proposals have allowed us to reach these new terms. I very much regret that the PCS leadership has not been able to sign up to this agreement at this time.

The Government intends that these new terms will now supersede the current terms following the passing of the interim legislation (Superannuation Bill). This Bill is currently going through Parliament and we will work with the unions to implement the new terms as soon as possible.

In terms of next steps, the union’s executives are likely to seek the views of their members on the proposed new terms. For the government the next stage is the Report Stage and Third Reading of the Superannuation Bill in the House of Commons on 13 October.

Notes to editors

Earlier this year the previous government put in place a reformed scheme with the agreement of 5 out of the 6 civil service unions. The sixth, PCS, sought judicial review and succeeded in having the scheme struck down by the High Court following a wider interpretation of what was protected under the 1972 Superannuation Act than had been the view within government.

Under the current scheme a longstanding employee may be entitled to compensation which is at times hugely out of kilter with the 30 week statutory redundancy scheme and comparable arrangements in the wider public and private sectors. Some longstanding employees are eligible for a package worth over 6 years’ pay. Individuals can accrue up to three months salary per year of service in some circumstances. The coalition government does not believe this is sustainable which is why they introduced legislation – the Superannuation Bill – in July.

New terms

The new terms include:

a standard tariff of 1 month’s pay per year of service

a limit of 12 months’ pay for staff made compulsory redundant

a limit of 21 months’ pay for those staff who depart under voluntary terms

where staff are earning less than £23,000 a year (on a full time equivalent basis) and are made redundant their compensation can be based on a salary of £23,000. This figure will be set at 90% of the ONS figure for the Private Sector Median Full time Earnings in the Annual Survey of Hourly Earnings (ASHE) or £23,000 (which ever is higher). The current Private Sector Median is £24,970;

staff who have reached their minimum pension age may be able to have access to an unreduced pension if they depart on voluntary terms

Staff earning more than 6 times the Private Sector Median Earnings (currently £149,820) will have the calculation of their compensation based on that figure rather than their actual salary

a reform of the process for making staff redundant which will lead to a significant shortening of the time taken; in addition, all staff departing will now receive 3 months notice (currently staff dismissed are entitled to at least 6 months notice)

The government is proposing to table an amendment to the Superannuation Bill. This will remove the ability of a union to veto any changes to the compensation scheme. For the future, the government will still need to consult on any changes, but they will not require the consent of the unions. For the purpose of the proposed new scheme, the negotiations leading to the agreement with the unions will constitute the required consultation. The amendment will also enhance the protection of accrued pension rights by vesting the power to agree to any decrease to such rights in the hands of each individual member of staff.

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